Tag: securities fraud

SCOTUS finds primary securities fraud liability for disseminating statements made by others with intent to defraud

Last week, SCOTUS decided Lorenzo v. SEC, a case involving a claim that an investment banker was liable for securities fraud when, at the direction of his boss, he cut, pasted and disseminated to potential investors information that his boss had provided, even though the banker knew the information was false.  In a 2011 case, Janus Capital Group, Inc. v. First Derivative Traders, SCOTUS had held that, an “invest­ment adviser who had merely ‘participat[ed] in the draft­ing of a false statement’ ‘made’ by another could not be held liable in a private action under subsection (b) of Rule10b–5.”   (Rule 10b–5(b) prohibits the “mak[ing]” of “any untrue statement of a material fact.”)  In Lorenzo, the question before the Court was whether a person who did not “make” statements (that is, who did not have “ultimate authority” over the statements), but who knowingly disseminated false statements to potential investors with intent to defraud, could be found to have violated subsections (a) and (c) of  Rule 10b–5.  The answer, in an opinion written by Justice Breyer, was yes. Will this case embolden plaintiff’s counsel to push the envelope and assert claims against people who are only peripherally involved in the dissemination of allegedly false information?  Time will tell what the ultimate impact of this case may be.

SEC sends a message — to executives and their companies

by Cydney Posner In October  2013, SEC Chair Mary Jo White gave a speech at the Securities Enforcement Forum in which she declared an “enforcement mission” of the SEC to be implementation of the “broken windows” theory of crime deterrence made famous decades ago in NYC: “The [‘broken windows’] theory is […]

Stinging dissent by Commissioner Aguilar: Is the SEC making fraudulent behavior look like an innocent mistake?

by Cydney Posner Following on the heels of a case, discussed in this post,  in which a CEO and CFO were charged with internal control and books and records violations (but no typical financial statement fraud allegation), comes another case against a CEO and CFO that likewise concluded with violations of […]